Your Down Payment
The amount of money you have available for a down payment will affect the type of loan you are eligible for. Generally, your down payment should not be less than 5 percent of the purchase price of the home.
Below is a list of tips you can use to accumulate a down payment in order to finance your dream home:
1. Save, Save, Save!
If you’re committed to purchasing a home, the best thing to do is start saving now! Look for ways to reduce your monthly expenditures and put those savings towards your down payment. You can also work out an automatic savings plan with your bank to have a portion of your paycheck transferred into your savings.
2. Use your RRSP contributions towards your down payment
You can withdrawal up to $25,000 from your RRSP tax-free for the purpose of buying a home. Another benefit of using your RRSP for the purchase of a home is that the withdrawal will not be claimed as income. The amount must be repaid within 15 years with a minimum annual payment of 1/15th of the amount withdrawn.
3. Reduce high interest rate debt
Although paying off debt with high levels of interest will reduce your savings, it will undoubtedly help you in the long run. Minimizing your debt will also put you in a better position to secure financing for a mortgage.
4. Negotiate with the seller
More often than not, sellers are willing to assist you in securing your financing. Ask the seller to carry a second mortgage to cover part of your down payment. You would be surprised how willing sellers are to help. Remember, you have nothing to lose by asking!
5. Gifts or loans from friends and family
Close friends, parents and other family members are often anxious to help you buy your first home. People close to you may have the resources available to help you with your down payment.